Correlation Between Jennison Natural and Victory Global
Can any of the company-specific risk be diversified away by investing in both Jennison Natural and Victory Global at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Jennison Natural and Victory Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jennison Natural Resources and Victory Global Natural, you can compare the effects of market volatilities on Jennison Natural and Victory Global and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Jennison Natural with a short position of Victory Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jennison Natural and Victory Global.
Diversification Opportunities for Jennison Natural and Victory Global
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Jennison and Victory is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Jennison Natural Resources and Victory Global Natural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Global Natural and Jennison Natural is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Jennison Natural Resources are associated (or correlated) with Victory Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Global Natural has no effect on the direction of Jennison Natural i.e., Jennison Natural and Victory Global go up and down completely randomly.
Pair Corralation between Jennison Natural and Victory Global
Assuming the 90 days horizon Jennison Natural is expected to generate 1.75 times less return on investment than Victory Global. But when comparing it to its historical volatility, Jennison Natural Resources is 1.13 times less risky than Victory Global. It trades about 0.18 of its potential returns per unit of risk. Victory Global Natural is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 3,371 in Victory Global Natural on September 2, 2024 and sell it today you would earn a total of 244.00 from holding Victory Global Natural or generate 7.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Jennison Natural Resources vs. Victory Global Natural
Performance |
| Timeline |
| Jennison Natural Res |
| Victory Global Natural |
Jennison Natural and Victory Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jennison Natural and Victory Global
The main advantage of trading using opposite Jennison Natural and Victory Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jennison Natural position performs unexpectedly, Victory Global can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Victory Global will offset losses from the drop in Victory Global's long position.The idea behind Jennison Natural Resources and Victory Global Natural pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bonds Directory module to find actively traded corporate debentures issued by US companies.
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